Impact of new tax reform on economy

From corporates to small businesses, inflation to impact on economy, here are 5 things to watch out for

1 SHAKING UP CORPORATE OPS

The new regime will force many companies to restructure their operations. Companies will now insist vendors and suppliers furnish invoices as GST will make it impossible for firms to evade taxes. Big companies stand to benefit as they have a supply chain in order . Smaller firms may end up spending more as compliance cost will rise.

2 PASSING ON THE BENEFIT

While the GST Council will keep a close vigil on if firms are passing on the benefit of lower taxes to consumers, experts expressed doubt on the implementation of anti-profiteering norm. Companies may use the savings from tax outgo under the GST regime to improve profit margin.

3 INFLATION MAY BE LOW

Analysts have no doubt that inflation will remain low as rates on essential goods have been either exempt or kept lower. However, assuming that GST does have the intended effect of increasing tax compliance, the tax burden would increase.

4 GROWTH MAY NOT JUMP

Economists are not sure of the immediate impact of GST and some even say it may impede growth in the short term as big companies reorganise their businesses and small firms lose revenue. Most analysts forecast the economy to grow close to 7.4% in 2017-18, the first year of GST rollout.